Vanguard Funds


    Fund Complex: Vanguard

    Management Company: Vanguard Group, Inc.

    Funds Affected: Vanguard Social Index Fund

    Sustainable Investing Strategy: Exclusions, ESG Integration

    The fund seeks to replicate the performance of the FTSE 4Good Index, which is derived from a selection of constituents that comprise the FTSE ESG ratings universe. As of September 2014, FTSE implemented a new ESG assessment methodology.  The new model contains over 300 Indicators, 14 Themes and 3 Pillars, including governance, social and environmental considerations. Environmental themes include climate change, water use, biodiversity and pollution and resources as well as supply chain considerations.  Social themes include customer responsibility, human rights and community, labor standards, health and safety and supply chain considerations; and the governance theme includes corporate governance, risk management, tax transparency and anti-corruption.

    Based on publicly available data, each company in the research universe is given a FTSE ESG Rating ranging from 0 to 5, with 5 being the highest rating. From June 2015 companies with a FTSE ESG Rating of 3.3 and above have been added to the index, subject to any additional requirements that comprise the overall methodology.  FTSE intends to revise down the inclusion threshold to 3.0 over time.  Constituents of the FTSE4Good Index with an ESG Rating below 2.5 are at risk of deletion from the FTSE4Good Index.

    Companies which manufacture the following products are excluded from the FTSE4Good Index Series: Tobacco, weapons systems, components for controversial weapons; cluster munitions, anti-personnel mines, depleted uranium, chemical/biological weapons and nuclear weapons as well as coal companies. FTSE includes other screens around controversies, water, nuclear power and manufacturing of infant formula, to ensure that these meet certain health and safety as well as customer responsibility criteria.